In a further boost to digital payments in the era of demonetisation, the government has suspended service charges on debit card and smartphone payments while the Central bank has increased the monthly transaction limit for mobile wallet users.

Digital wallet providers and financial industry experts lauded the decisions saying, these measures, even if temporary, would encourage greater adoption of electronic payments, especially among small merchants.

A primary objective of the government's decision to recall Rs 500 and Rs 1,000 currency bills is to encourage cashless transactions as a way to curb counterfeiting and corruption.

For digital wallet users meeting minimum know-your-customer norms, Reserve Bank of India has increased the monthly transaction limit to Rs 20,000 from Rs 10,000 till December 30. The suspension of service charges on debit card and smartphone payments also ends at the turn of the year.

“When the demonetisation led to a cash crunch, a lot of merchants started taking payments through digital wallets but could not accept beyond Rs 10,000. (Paytm founder) Vijay Shekhar Sharma along with others from the industry had approached the regulator to ask for an increase in the limit,“ said Nitin Misra, senior vice president at Paytm.

On the short timeframe of the relaxations, Misra said: “The regulator will need more time and consideration of data points to make a permanent change, which is perhaps why they have increased the limit only for a certain period.“

Paytm introduced a mobile application-based point-of-sale feature on Wednesday to allow merchants to accept card payments through its platform.